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6 Winning Stocks for Super Bowl Sunday - views
BALTIMORE (Stockpickr) -- It’s hard to believe that the final NFL game of the season is this Sunday: Super Bowl XLVI. In what’s anticipated to be the most-watched televised event of 2012, the New England Patriots are set to face off in Indianapolis against the New York Giants, a redux of the game’s 2008 matchup.
In many ways, the Super Bowl is inseparable from the stock market -- the so-called “Super Bowl Indicator,” for instance, suggests with 80% accuracy that if an NFC team wins the Super Bowl, a bullish year is ahead. I hate to be the bearer of bad news, but that doesn’t mean that a Giants win is a good reason to pile up on stocks; keep in mind that correlation doesn’t imply causation.
But there are less superstitious connections between the Super Bowl and stock market performance.
After all, the Super Bowl generates billions in ticket sales, ad revenues, and product and merchandise tie-ins, a massive haul for the handful of companies lucky (or loaded) enough to be connected with the NFL. With a record-setting game expected for this year, it makes sense to take a closer look at some of the stocks involved.
Regardless of which team you’re rooting for, here’s a look at five Super Bowl stocks that could see revenues climb thanks to Sunday’s game.
First up is Anheuser-Busch InBev (BUD), the largest brewing company in the world. AB InBev’s flagship brand is Bud Light, a beer name that just so happens to be the official beer of the NFL. Of course, the firm had to do more than send a couple of free cases to NFL Commissioner Goodell -- instead, BUD paid out approximately $1 billion for six years as the league’s official beer sponsor.
That’s not the only NFL sponsoring that AB InBev has been up to, however. The firm has also been known for buying out unsold Jacksonville Jaguars tickets to avoid media blackouts of the team’s games.
Football is big business for AB InBev. While Bud Light can’t be blamed for having a low profile (the brand owns 21% of the domestic beer market alone), the tie-in should help the firm capture a larger chunk of the market for consumers who aren’t completely sold on a single brand. It could also help to regain some share from craft brewers, who have been capturing an ever-larger share of the domestic market at the expense of brands like Bud Light.
There’s a whole lot more to AB InBev’s business than Bud Light, however. The firm owns 14 different brands that hold one of the top-two positions in a total of 19 different markets -- that dominance hasn’t been lost on shareholders. International business makes up a major component of revenues, diversification that U.S. investors should appreciate.
With millions of consumers planning to throw back a few on Sunday, AB InBev should be an outsized beneficiary.
Now onto a beverage brand of a different sort: Coca-Cola (KO). Coke is the world’s largest non-alcoholic beverage company, manufacturing brands like Sprite, Dasani, and Powerade in addition to its namesake soft drink.
Like AB InBev, Coke is a very international firm, with a distribution presence in more than 200 countries and a market that approaches 3% of the 55 billion beverages served worldwide each day.
Coke has also historically been a major advertiser in the Super Bowl. According to data compiled by CNBC, the firm has shelled out an estimated $66.8 million on Super Bowl ad spots between 2002 and 2011, with a lot more to be spent on this year’s game. That makes KO a Super Bowl stock, even if top rival PepsiCo (PEP) owns the title of official soft drink of the NFL.
Again, this is an example of a brand that needs no help getting to consumers -- Coke consistently ranks as one of the most valuable brands on the planet thanks to nearly universal recognition. Instead, major media events like the Super Bowl are an opportunity for Coke to get its branding front-of-mind for shoppers.
In recent years, Coca-Cola has done a good job of expanding margins and pushing its footprint even wider. The firm integrated around 80% of its North American distribution under KO’s corporate umbrella, a move that’s been accretive to margins.
At the same time, emerging markets exposure and new soda fountain innovations could drive material revenue growth in the next few years.
Approximately one-third of Super Bowl commercials are car commercials -- so it shouldn’t come as a huge surprise that General Motors (GM) is next up on our list. In the last nine years, this $37.5 billion automaker has spent approximately $82.8 million advertising during the big game, and with new spots slated for this year, the firm should get plenty of eyes on its products on Sunday.
GM has had one of the highest-profile turnarounds in the business world since the height of the recession. Since shedding massive liabilities through its bankruptcy, the firm has improved the quality of its cars, regained consumer confidence, and swung to profitability. While there’s still room for GM to improve its business (particularly on margins), investors should feel good about the fact that this firm is actually capable of keeping competitive with rivals once again.
In the near-term, emerging market sales should be a driver of growth for legacy domestic names like General Motors as burgeoning middle class consumers in regions like Asia start acquiring automobiles in numbers.
Meanwhile, the fact that UAW contracts are set until mid-2015 provides GM with an opportunity to get its own house in order before may need to start making financial concessions to its unions.
Comcast and General Electric
We can’t talk about the Super Bowl without mentioning the television network that’s airing it this year: NBC. The network, which is owned jointly by Comcast (CMCSA) and General Electric (GE), paid the NFL $3.6 billion for its current contract ending in 2013. After next year, the network’s rates to carry the NFL get ratcheted higher.
That’s a justified expense though. NFL games are currently the highest-rated shows on network TV, a fact that’s magnified with Sunday’s Super Bowl game; advertising for the game was sold-out by Thanksgiving, generating the highest rates in the history of the game. Buying out a 30-second spot for Super Bowl XLVI cost companies an average of $3.5 million.
Even though NBC only makes up a small part of Comcast and GE’s respective businesses, that part is certainly material. That’s especially true this year, with the Super Bowl alone expected to account for 15% of the network’s revenues in 2012.
While NBC will have to wait a couple of years for its next chance at airing a Super Bowl, it’s certainly taking advantage this year.
Papa John’s International
Last up on our list is Papa John’s International (PZZA), the small-cap pizza chain that holds the moniker of (you guessed it) official pizza of the NFL. Papa John’s is in the final year of a multimillion-dollar deal to become the league’s official pizza brand, an arrangement that’s particularly significant because of the chain’s size -- with a market capitalization of just $943 million, the impact of the firm’s NFL deal is larger than most.
Papa John’s has more than 3,600 locations spread throughout all 50 states and 32 countries, a reach that’s well shy of rivals but gives Papa John’s room for expansion in an otherwise saturated market. Of those 3,600 locations, approximately 600 are company-owned, providing the firm’s income statement with margin-friendly integration. Because the balance of the firm’s locations are franchised, the company is able to generate significant cash flows from the day to day operations of those remaining locations.
From a financial standpoint, Papa John’s, one of TheStreet Ratings' top-rated restaurant stocks, is in solid shape, with a debt load that’s more than halved in the last year and ample liquidity. Profitability has remained consistent for the past several years -- international markets should offer some less-competitive revenue streams in the mid-term. Meanwhile PZZA’s official pizza status should help the firm capture some of the $118.50 that Visa (V) estimates the average fan will be spending on Super Bowl parties this Sunday.
To see these football stocks in action, check out the NFL Stock 2011 portfolio on Stockpickr.
-- Written by Jonas Elmerraji in Baltimore.
At the time of publication, author had no positions in stocks mentioned.
Jonas Elmerraji, based out of Baltimore, is the editor and portfolio manager of the Rhino Stock Report, a free investment advisory that returned 15% in 2008. He is a contributor to numerous financial outlets, including Forbes and Investopedia, and has been featured in Investor's Business Daily, in Consumer's Digest and on MSNBC.com.